Posted on 02 October 2015 with no comments from readers
A recent Reuters report about surging silver coin sales all over the world (click here) has precious metal investors wondering if this is not an early sign of the sort of increased physical metal demand that would surely precede another big take-off in silver prices like in 2009 to 2011 when silver rocketed from $8.50 to $49.50 an ounce, still just short of its 1980 all-time high.
The US Mint today reported third quarter sales of silver eagle coins running at their highest level for 29 years. That might seem odd with the price of silver so low but then this price is set in the Comex futures exchange and so has more to do with paper trading that the real metal.
The mints quite fairly point out that there is a shortage of coin manufacturing capacity rather than a shortage of actual silver. Indeed, silver prices have slumped this year along with all other industrial metals due to the emerging recession in China and its impact on demand for the metal.
Low prices now
However, those stocking up on coins are not particularly worried by the higher and higher premiums now being paid on the spot price because they can see scope for a considerable advance in prices now down 70 per cent from their 2011 highs. Silver should be a very good candidate for a recovery in another bout of money printing after a more serious shake-out in stock markets.
Remember what happened back in late 2008 to March 2009 when stock markets bottomed out. Then as now silver prices also suffered bad falls. But when it came to the recovery phase nothing beat the advance in silver prices with a 700 per cent surge over the next two years. Gold was quite a long way behind and the stock market nowhere near silver.
Of course buyers now could be buying the shiniest metal too early. Maybe the stock market will tank and take commodity prices even lower, although to be honest it is equally plausible to argue that the bombed out commodities sector has already had its big crash and it will be stocks next.
Last time around money printing did much more for commodity prices than stocks in the aftermath of the global financial crisis. Some bears are already talking about negative interest rates and a QE4 program. Nothing would light a fire under precious metal prices more quickly.
So who says the smaller investors all round the world buying silver coins are behaving irrationally. Surely the irrational ones are those who still have their money in a stock market in the early phases of a bear market, or bonds that pay very low yields.
Still you can’t expect professional investment analysts to get things right all the time. They missed silver entirely last time and will do so again.
You have to look for alternative commentators to find appropriate advice when things are going wrong on Wall Street, unless you want to be completely ruined!